What is Brand Equity?

Published by Colin Finkle on

Brand Equity definition: the portion a company’s value attributable to its brand(s).

Simply, brand equity is the value of a brand.

Brand equity can be measured in currency (ie. USD) but is notoriously hard to price. Brand equity is always a part of the overall value of the company, and a company’s value is always based on future sales. Brand equity thus is the value of those future sales attributable to the brand(s) owned by the company. The definition of a brand is the preconceptions the customers, and those preconceptions affect sales. The brand equity is the value of customer preconceptions.

Apple's Company Value. 41% brand, 59% all other asset.For example, Apple has a market cap or company value of $567.32 B, and a brand value of $233.7 B, so 41% of the total value of Apple is wrapped up in its brands.



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So theoretically, Apple would lose nearly half of its value overnight  if some bizarre trademark dispute meant that Apple could no longer sell under the name “Apple,” use the logo, similar graphics or the website / domain names, and not use any other brands (such as iPhone, or Macbook) as well.


Article of note: Is the NRA the Mythical Negative Equity Brand?


Theoretically, Apple could close up shop and sell or license it’s brand for $233.7 B dollars, but you may rightly question that. If Apple wasn’t making its products with its technology and talents, would it still be an Apple product? You would be right to say no. Brand equity is entwined with every other component of a company’s value. Companies are gestalt; they are their complete whole, inherently indivisible. This doesn’t stop companies licensing their brand to good and bad consequences.

The value I used for Apple’s brand is on Fortune’s list of most valuable brands, where Apple typically lives at the top. Fortune’s methodology to assigned a figure to the brand value is to take the market cap of a company, subtract away all other assets and liabilities and multiply an index based on industry to account for the customers of different types products being more or less brand loyal. This methodology isn’t perfect, but none are. I am hoping that evaluating data with artificial intelligence will get us closer to true brand value in the future.


Another article of note: What is Brand Awareness?


It’s also interesting to note that Apple spends $1.8 B a year in advertising, and just can’t get up to $233.7 B value through investment in advertising alone; it just doesn’t mathematically add up because the return on investment (ROI) would just be an insane multiple. It goes to show that you can’t just “buy” brand equity through advertising; you have to earn it through operating as an exceptional business and giving value to customers through your products and services. A company builds it’s brand equity through people having positive experiences with their product, word of mouth, and customer relationships / service, and then linking these positive associations to unique graphics and brand names. It all adds up and contributes to brand equity.


Colin Finkle

Colin Finkle is a brand marketer and designer with ten years of experience helping Fortune 500 companies tell their story at retail. You can see his work at finkle.ca

9 Comments

Ten Ways The iPhone Changed Our Culture | Brand Marketing Blog · July 25, 2017 at 1:05 pm

[…] half of that value is Apple’s brand, as we discussed in our definition of brand equity. No company in the world is better at turning innovations into customer […]

Beats By Dre™ brand case study | Brand Marketing Blog · August 17, 2017 at 1:02 pm

[…] that value is in the Beats brand and its consumer association to the music industry (check out our definition of brand equity). There was technology on the streaming side, and the value of Jimmy Iovine becoming an Apple […]

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[…] That is why we see some companies, like Hardee’s and Tyson, rebrand to remove that background, and instead make their logos “pop” by having two logos with the wordmark in either full black and full white, and then using the one that works best in context. The logo is still wholly recognizable even though it is sometimes seen in black and sometimes in white, and does not hurt the companies ability to accrue brand equity (link to: What is Brand Equity?). […]

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[…] carefully considered because they will have an impact on each other’s brand associations and brand equity. There are five strategies. 1) Master Brand strategy: the company brand is the focus and is […]

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[…] dilution is when brands are made less effective and less valuable through excessive […]

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[…] brand has a value because it does contribute to future sales and profits. That value is called brand equity and can be hard to measure, but it is very […]

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[…] name and graphics, particularly your logo, and to rebrand is to throw those away along with the brand equity […]

What is Brand Awareness? | BMB: Brand Marketing Blog · February 21, 2018 at 1:09 pm

[…] awareness is the breadth of the brand. It is one of the two orthogonal factors that make brand equity (the value of a brand), the other one being brand depth. The separation of brand awareness from brand depth is why I say […]

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[…] get theoretical. Brand equity means the monetary value of a brand. Brand equity breaks down into brand awareness (how many people know about a brand) and brand depth […]

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